Terence Flanagan (Dublin North East, Independent) | Oireachtas source

I thank the Ceann Comhairle for the opportunity to raise this important issue. I also thank the Minister of State at the Department of Finance for being present to reply to this matter and I wish him well in his new role.

There is an urgent need to introduce a cap on the interest rates that can be charged by moneylenders. They are regulated by the Consumer Credit Act 1995. I have concerns that not enough is being done to ensure that moneylenders charge their customers a fair interest rate. The Central Bank renews licences for moneylenders on a year basis. It can refuse to grant a licence where it deems the cost of interest to be charged is too high and unfair to the customer, yet there are instances where it is renewing moneylenders' licences where some moneylenders are charging up to 188%, and even more in some cases, in interest rates.

There are 43 moneylenders licensed to operate in Ireland with the majority being small to medium enterprises. There has been an increase in the number of customers who have turned moneylenders with the number increasing by 60,000 in recent years. Obviously that is due to the economic situation. Also, many low income earners have turned to moneylenders because they have been refused credit by the credit unions and the banks. That is an issue that the Minister needs to examine further.

I have concerns that people are not aware of the loan amounts, interest amounts and profits that have been accrued in some of the deals entered into. More transparency and accountability need to be introduced. With his banking background, Deputy Mathews will appreciate that schedules need to be introduced that would set out the capital amount, the amount of interest and projected payments once payments of a fixed amount are being made on loans. The imposition of a high interest rate limit could impact on the moneylending sector and make it unviable for some operators and people may turn to illegal moneylenders whose operations are unregulated which would be even worse. Nobody would want that to happen.

In that regard, a cap on interest rates is what is needed. The Minister would have to be careful as to the ceiling he would set for the highest level of interest moneylenders could charge. For example, a person who takes out a loan of €100 and pays €58 in interest on top of the loan of €100 is paying a considerable level of interest. The Central Bank is allowing that to happen at present.

I ask that an interest rate ceiling of 50% be set which would be greatly beneficial to many customers who use moneylenders. I ask the Minister to consider that proposal. Some 13 members of the European Union have already introduced legal caps on licensed moneylenders with Spain enforcing a 10% APR cap, Belgium a 19.5% cap and France a 21.6% cap. Also the UK is considering introducing legislation in this area with a maximum interest rate of 100% APR for short-term lending. Will the Minister look to what is happening in the rest of Europe and introduce some level of a higher limit of interest rate that can be charged in these instances?

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